On the morning of December 21 the Voice of America brought bad news to Ukraine. The United States reacted without delay (in fact on December 20) to the voting-down of the bill On Government Regulation of the Production, Export, and Import of Laser Readout System Discs in the Ukrainian parliament on Thursday, imposing trade sanctions against this country. That same day, the US Embassy in Kyiv published a press release saying that the US government is imposing $75 million trade sanctions on Ukraine because of its continuing media piracy. Sources here estimate that Ukraine will incur between $400 and $500 million in losses as a result.
This decision envisions prohibitive tariffs on the import of Ukrainian metals, footwear, and other goods. The sanctions will offset US government estimates of the amount of annual damages that this piracy of optical media, which includes unauthorized licensing and production, has caused Americans. A document received by The Day from the embassy quotes US Trade Representative Robert B. Zoellick as saying in Washington on December 20, “The United States is moving forcefully to protect its rights... We hope Ukraine will now redouble its efforts to deal with the piracy of intellectual property and pass the legislation needed to allow us to lift the sanctions. However, Ukraine has still not fulfilled its commitments.”
According to Mr. Zoellick, the World Trade Organization (WTO), which Ukraine wants to join, takes the piracy of US intellectual property as seriously as does the US government, and it is difficult to see how Ukraine can “address either America’s concerns or WTO rules” without adequate legislation on intellectual property rights.
The embassy press release broadly hints at the failure of the Ukrainian government to fulfill the necessary commitments and provides detailed background on the issue. During two years of negotiations, Ukraine was repeatedly granted deferments in compliance at government request. Such requests were made for the first time by the pro-American Yushchenko government which submitted in June 2000 an action plan to the US whereby Ukraine pledged to use the existing law enforcement instruments to curtail piracy and establish by November 2000 an optical media licensing regime, which would serve to prevent any subsequent recurrence. Reliable sources indicate that large volumes of optical media products continue to be pirated in Ukraine. In response, the US stripped Ukraine of its Generalized System of Benefits (GSB) eligibility in August. As the embassy press release notes, the goods covered by increased duties was posted at the www.ustr.gov website on December 21, 2001, while the increased tariffs will go into effect on January 23, 2002.
Now let us return to CD debate in Ukraine, widely considered as one of the world’s major producers of bootleg laser discs. It will be recalled that a relevant bill has already been discussed in the second reading. On November 29 Verkhovna Rada approved the government’s bill in the first reading, rejecting the Economic Policies Committee proposal to pass the law at once. The bill envisages licensing the production, export, and import of discs, the manufacturing equipment and/or its main units, and the raw materials for such CDs.
The bill also sets out fines to be imposed for CD production without a license, without identification codes, or without authorization of the copyright holder.
Verkhovna Rada twice voted on this question, falling short by six and 22 votes respectively. Those who voted against were the Communist, Yednist (Unity), Yabluko, Socialist, and part of the Reforms and Order fractions, Ukrayinski Novyny reports. According to Prime Minister Anatoly Kinakh, who will have to bear the main responsibility for this parliamentary decision, Yednist let him down quite unexpectedly. Pundits of the parliamentary antechamber claim that the outcome was “stimulated” by material incentives.
Incidentally, Verkhovna Rada Chairman Ivan Pliushch also thinks that the parliament failed to pass the bill to combat the contracting of counterfeit goods in the second reading because of “inadequate efforts by the government and the lobbying of economic interests by certain representatives of political forces.” He did not rule out that this law would be again be brought up in January “if the government still insists,” as if sanctions against Ukraine were only Mr. Kinakh’s problem. It follows from this that Speaker Pliushch, who stays close to Yednist and Our Ukraine, which includes Reforms and Order, is not so bitter with failure to pass the anti-piracy law. In any case, he “is not making a problem” out of the US decision to curtail Ukrainian exports, calling this simply US “bias.” “I do not believe we are the greatest pirates, but for some reason they decided to jump on us. America isn’t the only game in town,” he said, confident that Ukrainian rolled metal “will find a market.” It would have been nice had he told the managers employing tens of thousands of workers where to seek that market.
Meanwhile, Ihor Eichenvald, chairman of the Ukrainian League of Copyright and Related Privileges Users, which has publicly opposed the law, rejected the idea that the vote was “stimulated” in an interview with The Day: he is unaware of any such thing and advises not listening to rumors. According to him, there was nobody to do this because “there is only one enterprise left, Rostok, and even had it really wanted to, it just could not have done so... It simply doesn’t have the financial resources. And the main thing is, this is a gross violation of the law in force.”
Incidentally, Mr. Eichenvald thinks that what the Ukrainian parliament did was not to reject the bill as such but only point out the ill-considered provisions that contravene the current law.
Earlier, Rostok President Ihor Masol had also claimed that the bill On Government Regulation of the Production, Export, and Import of Laser Readout System Discs was of a corrupt nature because it puts the bureaucrat above the production process. “It would have given bureaucrats the power to go through everything with a fine-tooth comb, which they would use on everybody,” he says. According to Mr. Masol, should the law be passed, there will only be pirated CDs left in Ukraine. Last Friday The Day sought Mr. Masol’s opinion about the US sanctions against Ukraine, but his contact person Volodymyr Natalchenko said the president was leaving Ukraine that same day and would not be back until New Year’s.
Meanwhile, the premier commented on the defeat, saying the government of Ukraine would conduct talks with the US to seek another deferral of trade sanctions pending the passage of the laser disc law, hoping that Verkhovna Rada will adopt it as soon as possible. Such hopes are clearly in vain. According to Cabinet spokesman Serhiy Nahoriansky, on Friday morning the government began to draw up a statement about the sanctions that fell (not quite unexpectedly) on Ukraine.
Mykola Azarov, Director of the State Tax Administration, immediately announced that US sanctions against Ukraine would jeopardize state budget revenues. “I wish those who defeated this bill had thought about the possible consequences,” he told Interfax- Ukraine. Perhaps for reasons of political correctness, Ukraine’s publican in chief refused to specify the officials who did not “think about the consequences,” but it is difficult to question the propriety of Mr. Azarov’s conclusion: “This again showed the irresponsibility of our members of parliament and their inability to foresee the possible consequences to the steps they take.”
INCIDENTALLY
Ukrainian President Leonid Kuchma believes US President George Bush made a fair decision to impose sanctions on Ukraine and lays all the blame on the people’s deputies, Interfax-Ukraine reports. If we want to play by international rules, Ukraine should not be an exception, Mr. Kuchma said on December 21 in Kirovohrad. “I am surprised that the reformers from Our Ukraine, Pynzenyk, and his team failed to support this law,” the president said, adding that he is “aware that the Communists and Socialists want things to be bad.” Mr. Kuchma also understands the Fatherland fraction’s position: “Those deputies have no human conscience: just fancy them so hating themselves and their own people... Now we are going to lose American markets too.” The chief executive spoke with deep regret.
